Oil Futures :Crude Ticks Lower as Volatility

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article-title class=entry-title>OIL FUTURES: Crude Ticks Lower as Volatility Eases

By Ben Winkley

Published October 05, 2012

Dow Jones Newswires

Published October 05, 2012

Dow Jones Newswires

Crude-oil futures ticked lower Friday in London ahead of important U.S. employment data due later in the global day, with no sign of the wild price swings seen in the past couple of days.

At 1000 GMT, the front-month November Brent contract on London's ICE futures exchange was down 83 cents at $111.79 a barrel.

The front-month November light, sweet crude contract on the New York Mercantile Exchange was trading 77 cents lower at $90.94 a barrel.

The swings of the past two days were such that on Thursday both contracts almost reached an outside reversal, a pricing situation in which both the high and low for the day exceed those of the previous session. Brent lost more than $3 Wednesday and gained more than $4 Thursday, while West Texas Intermediate, the U.S. benchmark crude, lost and gained more than $3 in both sessions.

The rebound was led by geopolitical issues, with rising tensions on the Syria-Turkey border adding risk premium, particularly into the more-exposed Brent contract.

Although the immediate region isn't a significant oil area, fears of unrest spreading into the country's neighbors--such as big producing nations like Iran and Iraq--are acting as a counterbalance to fears of eroding oil demand in economically-straitened Europe and placing a floor under prices.

In a note, Olivier Jakob of Petromatrix flagged the vulnerability of the pipeline that carries oil from northern Iraq to the Turkish port of Ceyhan, and said he will keep an eye on the days events in Jordan, where parliament has been dissolved and the Muslim Brotherhood has called a large protest.

On the other side of the Atlantic, the WTI contract is being constrained by poor U.S. economic data, raising fears about demand with domestic production at a near 16-year high. Strength in the wider products complex is found in gasoline--a fire at Exxon Mobil Corp.'s (XOM) massive Baytown, Texas, refinery was enough to push prices higher still at a time when the market is already tight and U.S. inventories are at the bottom end of the five-year range.

The Brent-WTI spread, the price differential between the two contracts, widened further Friday, pushing briefly above $21 for the first time.

Later Friday, oil market participants will keep a weather eye on the U.S. nonfarm payrolls report for September.

Usually read for indicators of the health of demand in the world's largest oil-consuming economy, a better- or worse-than-expected reading can move the price of oil. However, Petromatrix's Jakob said that the Federal Reserve's commitment to a further 18 months of quantitative easing means the numbers no longer hold so much importance for the oil complex.

The ICE's gasoil contract for October delivery is up $11.50 at $990.50 a metric ton, while Nymex gasoline for November delivery is down 135 points at 2.9294 cents a gallon.

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